Seeking Alpha

Facebook is expected to file preliminary paperwork for a $5B IPO on Wednesday morning, reports...

Facebook is expected to file preliminary paperwork for a $5B IPO on Wednesday morning, reports IFR, citing sources close to the deal. Morgan Stanley (MS) will get the lead underwriting role, with Goldman Sachs, Bank of America, Barclays, and JPMorgan also part of the syndicate.
Comments (13)
  • Stoploss
    , contributor
    Comments (1727) | Send Message
     
    What happened to 100B?
    31 Jan 2012, 05:12 PM Reply Like
  • Benjamin009
    , contributor
    Comments (23) | Send Message
     
    I think the correct valuation is 100M. Not 100B, Stopless.

     

    "In the first place, as an absolute number, getting paid 1 percent of a $10 billion offering means you get $100 million."

     

    http://bit.ly/y72A8U
    31 Jan 2012, 11:47 PM Reply Like
  • Stoploss
    , contributor
    Comments (1727) | Send Message
     
    The company is IPO'ing for 5 BILLION with a B. 100M x 10 = 1B. The valuation is between 75 - 100 BILLION. Got that?? It's kindergarten math.
    1 Feb 2012, 09:44 AM Reply Like
  • bull_market_somewhere
    , contributor
    Comments (115) | Send Message
     
    thats the valuation, not the offering. but i thought the inital was supposed to be $10billion?? what happened?
    31 Jan 2012, 05:45 PM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    Wow. That tells you they are terrified of trying to issue an IPO at a $100 billion dollar valuation with anything resembling a normal float.

     

    5% or less of the company - kind of a weird IPO more like a private placement. I guess the overhang from insiders is going to destroy this stock long-term.
    31 Jan 2012, 06:12 PM Reply Like
  • bruderphillip@hotmail.com
    , contributor
    Comment (1) | Send Message
     
    cnbc says it will most likely increase at the time of offering
    31 Jan 2012, 09:09 PM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    Too many people have spotted this as a fluke, cat's out of the bag.

     

    Most don't even know what an IPO is. They aren't aware it's an attempt to raise cash to pay down debt, to improve the company's image for the Press.

     

    Overvalued IPO's are a short seller's wet dream. On (T), short selling will begin within the hour of emission.

     

    They (Facebook) owe 10 X what they hope to raise through the emission, to a litany of venture capital groups, who will all have their hand out after (T+3). They will pay out ACCEL PARTNERS $9 BIL USD alone. That will wipe out their funds raised.

     

    Regarding oversells, Underwriters will try to cover this over allocation by exercising the "over allotment" option, (which Underwriters are famous for).

     

    Short sellers, knowing that the Underwriter is overextended, and will buy shares at a inflated price, will take advantage of the subsequent price decline.

     

    Winner winner, chicken dinner.
    1 Feb 2012, 04:08 AM Reply Like
  • Gloube
    , contributor
    Comments (104) | Send Message
     
    Interesting post, thanks. Three questions:

     

    (i) What do you mean, they "owe" money to venture capital groups? How did these groups invest in FB? Was it equity, debt or something in between? If it is pure equity I don't understand how they would "owe" them anything

     

    (ii) What is the problem of doing an IPO to pay back debt? What does it change in the picture for new investors?

     

    (iii) "Short sellers, knowing that the Underwriter is overextended, and will buy shares at a inflated price". Shouldn't they sell rather than buy shares at inflated price in order to take advantage of the price decline?

     

    Thanks.
    1 Feb 2012, 04:21 AM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    I will address each point to save time.

     

    1) Private Equity and Venture Capital have funded them completely until now. ACCEL PARTNERS will get the top payout.

     

    Payout to ACCEL PARTNERS, $9 BIL USD, there's the money raised by the IPO wiped out in one transaction.

     

    EXAMPLE:
    $10 BIL USD (raised in IPO) - $9 BIL USD (OWED TO ACCEL) = Net Result $1 BIL USD.

     

    Then repeat this process for the additional Capital Investors:

     

    Greylock Partners
    Meritech Capital Partners
    Elevation Partners
    Sequoia Capital
    Kleiner,Perkins,Caufield, & Byers
    Hercules Tech. Growth Capital

     

    yaddah, yaddah (ALL OWED MONEY)

     

    2) Nothing wrong with it, it's actually the entire reason FOR an IPO. To pay down massive debt, through the emission, and save the company's image in the Press. That is an IPO by definition.

     

    The problem is, the way the Press spins it is, Facebook is worth $100 BIL USD, which is bullsh*t. It might be worth $5 Mil USD with the software patents on a good day. Then they think, "oh wow, get in now, as the price will follow Google, Apple etc. Not happening with new regulation right around the corner.

     

    3) Read:

     

    *Short Selling in Initial Public Offerings. By. Amy K. Edwards and. Kathleen Weiss Hanley. *. Office of Economic Analysis. U.S. Securities and Exchange Commission, for a deeper look into this.
    2 Feb 2012, 08:35 AM Reply Like
  • Gloube
    , contributor
    Comments (104) | Send Message
     
    Thanks for your answer
    2 Feb 2012, 08:38 AM Reply Like
  • bull_market_somewhere
    , contributor
    Comments (115) | Send Message
     
    until you come up with a better valuation model than the firms who bring companies public, this is all we have and all that really matters.
    2 Feb 2012, 08:49 AM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    http://bit.ly/xoBqFR

     

    FEBRUARY 3, 2012
    What's to "Like" About High-Tech IPOs?

     

    As I said, trouble right 'round the corner.

     

    * If bullsh*t and conjecture can value a company that earns a mere $1 BIL USD in profit @ $100 BIL USD, then by the same valuation model, I am worth $20 BIL USD, according to your math.

     

    Underwriters have a habit of valuating @ 10 X real value, sometimes higher, as seen here.
    4 Feb 2012, 04:45 AM Reply Like
  • bull_market_somewhere
    , contributor
    Comments (115) | Send Message
     
    benjamin.. facebook is valued between 75-100bil
    1 Feb 2012, 08:29 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|